FACTORY ORDERS (Reuters)
“New orders for U.S.-made goods rose less than expected
in January and shipments fell for a fourth straight month, offering more
evidence of a slowdown in manufacturing activity. Factory goods orders edged up
0.1 percent, the Commerce Department said on Tuesday, held back by decreases in
orders for computers and electronic products…” Story at…
AVI GILBERT COMMENTARY (MarketWatch)
“Many investors are starting to get bullish as U.S.
stocks approach a potential topping target. For those who follow the market closely,
you know this is typical. Over the past week, we have seen interesting dynamics
across many segments of the market we track. The weight of evidence is still
pointing to a corrective rally, which will likely have stocks revisit the
December 2018 lows, and potentially lower… it seems investors have jumped into
the market in a big way over the past week. There was one of the largest weekly
inflows into U.S. equities in 52 weeks [$25 billion] and the fourth-largest
weekly inflows on record. Based on the other evidence, this could suggest
investors are streaming into the market as a top nears.” -Avi Gilbert, ElliottWaveTrader.net
TECHNICALLY SPEAKING (Real Investment Advice)
“Currently, the deterioration in the growth rate of
earnings, and economic strength, are not supportive of the current levels of
asset prices or leverage. The idea of whether, or not, the Federal
Reserve, along with virtually every other central bank in the world, are
inflating the next asset bubble is of significant importance to investors who
can ill afford to, once again, lose a large chunk of their net worth. It is all
reminiscent of the market peak of 1929 when Dr. Irving Fisher uttered his now
famous words: ‘Stocks have now reached a permanently high plateau.’” –
Lance Roberts.
My cmt: Lance Roberts isn’t calling for a drop right now,
but he does feel that markets are exhibiting topping behavior, including a
possible climb above prior highs.
CYCLICALS UNDER-PERFORMING (NTSM Blog)
When the red and green lines are falling, it signals that
the XLI-ETF (Industrial Cyclicals) is under-performing the S&P 500. When investors are concerned, cyclicals underperform.
While it may be tempting to ignore this chart because the drop predicted by the
XLI-S&P 500 divergence may have already occurred, I don’t think that is the
case; I have other measures of XLI vs. S&P 500 that are just now warning of
a top in the S&P 500. No indicator is perfect, but this is enough of an issue
to make me remain mostly out of the stock market. This indicator is not necessarily calling
currently calling for a large drop.
MARKET REPORT / ANALYSIS
-Monday the S&P 500 was unchanged at 2833.
-VIX rose about 4% to 13.56.
-The yield on the 10-year Treasury rose to 2.618%
Today, Bollinger Bands were nearly oversold. RSI is neutral.
I like to use these indicators together so this isn’t really a very strong negative
for now.
My Breadth vs the S&P 500 indicator dropped back into
a more neutral position. That is a good
topping indicator that was stretched earlier – now it isn’t giving a signal.
On the bullish side, MACD made a bullish crossover today
and Money Trend remains positive; Late day action was negative today, but the longer-term
version of this indicator is beginning to turn up. This would indicate that Pros
are beginning to buy or at least hold positions overnight.
My daily sum of 20 Indicators jumped from +3 to +9 (a
positive number is bullish; negatives are bearish) while the 10-day smoothed
version that negates the daily fluctuations improved from +12 to +21. This is
bullish.
I still haven’t managed to increase my percentage of
stock investments. XLI-S&P500 divergence
is an issue – we’ll see.
MOMENTUM ANALYSIS:
TODAY’S RANKING OF
15 ETFs (Ranked Daily)
The top ranked ETF receives 100%. The rest are then
ranked based on their momentum relative to the leading ETF. While momentum isn’t stock performance per
se, momentum is closely related to stock performance. For example, over the
4-months from Oct thru mid-February 2016, the number 1 ranked Financials (XLF)
outperformed the S&P 500 by nearly 20%. In 2017 Technology (XLK) was ranked
in the top 3 Momentum Plays for 52% of all trading days in 2017 (if I counted
correctly.) XLK was up 35% on the year while the S&P 500 was up 18%.
*For additional background on the ETF ranking system see
NTSM Page at…
TODAY’S RANKING OF THE DOW 30 STOCKS (Ranked Daily)
The top ranked stock receives 100%. The rest are then
ranked based on their momentum relative to the leading stock.
*I rank the Dow 30 similarly to the ETF ranking system.
For more details, see NTSM Page at…
TUESDAY MARKET INTERNALS (NYSE DATA)
Market Internals improved
to POSITIVE on the market.
Market Internals are a decent trend-following analysis of
current market action but should not be used alone for short term trading. They
are usually right, but they are often late.
They are most useful when they diverge from the Index. In 2014, using these internals alone would
have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on
Negative – no shorting).
My current stock allocation is about 30% invested in
stocks on as of 9 January 2019. For me, fully invested is a balanced 50% stock
portfolio so this is a very conservative position.
INTERMEDIATE / LONG-TERM INDICATOR
Tuesday, the PRICE
and VIX indicators were positive. The VOLUME and SENTIMENT indicators were
neutral. Overall this is a BULLISH indication. I remain defensive for the time
being depending on market action.
